VIG vs VYM - Vanguard's Popular ETF Comparison! (Which Is The Best One?). In this comparison video I will discuss about VIG vs VYM.
So, the main difference between them is their investment strategies and resulting portfolio compositions.
VIG (Vanguard Dividend Appreciation ETF) follows the S&P U.S. Dividend Growers Index, focusing on stocks with a history of increasing dividend payments over time.
On the other hand, VYM (Vanguard High Dividend Yield ETF) tracks the FTSE High Dividend Yield Index, emphasizing stocks with high dividend yields without considering their dividend growth histories.
Performance:
Over the past five and ten-year periods, VIG has outperformed VYM, displaying higher total returns. This outperformance can be attributed to VIG's focus on dividend growth stocks, which have historically generated strong returns over the long term. By investing in companies with a consistent track record of increasing dividends, VIG captures the benefits of compounding dividends over time, contributing to its outperformance relative to VYM.
On the other hand, VYM offers a higher current yield than VIG due to its focus on high-yield stocks. This characteristic appeals to investors seeking immediate income.
Sector Allocation:
VIG has a higher concentration in Information Technology, reflecting a significant exposure to this sector. Other notable sector allocations for VIG are Health Care and Financials. By investing in VIG, you can access a portfolio that spans multiple sectors within the U.S. market, offering you well-rounded exposure to various industries. This diversification can help mitigate risks associated with sector-specific downturns or fluctuations, providing you with a more balanced approach to investing in U.S. equities.
VYM, on the other hand, has a diversified sector allocation compared to VIG. The largest sectors represented in VYM are Financials, Consumer Staples, and Health Care.
But do they have any similarities?
Yes, they are similar in that they are both passively managed exchange-traded funds (ETFs) offered by Vanguard, providing investors with exposure to dividend-paying stocks. In addition, they both offer low expense ratios, making them cost-effective options for investors seeking dividend-focused strategies, and they have a focus on dividend investing, catering to investors looking for income generation and potential capital appreciation.
To sum up, how do they compare- VIG vs VYM?
I started my investment with VYM as it offered a higher dividend yield. However, I like VIG due to its historical outperformance and focus on companies with consistent dividend growth.
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